Trump Accounts: What Parents Need to Know

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A new type of savings account for children — commonly referred to as a “Trump Account” — officially becomes available on July 5, 2026.

Like most new legislation, there’s already a mix of excitement, confusion, marketing hype, and political noise surrounding it. So let’s strip away the headlines and focus on the practical financial planning side:

What are these accounts? Who are they good for? And where do they fit compared to 529 plans, Roth IRAs, and taxable investment accounts?

What Is a Trump Account?

A Trump Account — formally named the Money Account for Growth and Advancement (MAGA Account) under the One Big Beautiful Bill Act (OBBBA), signed into law on July 4, 2025 — is a long-term investment account designed for children.

Think of it as a cross between a traditional IRA and a 529 savings account. During the child’s growth period (from account opening through December 31 of the year they turn 17), special rules apply. After that, the account converts and is generally treated as a traditional IRA.

Under the law, eligible children born between January 1, 2025, and December 31, 2028 may receive a one-time $1,000 federal seed contribution to help jumpstart the account.

One important note: enrollment is opt-in. Parents must proactively elect to open an account — it is not automatic. Elections can be made via IRS Form 4547 or by registering online at trumpaccounts.gov beginning in mid-2026.

Parents, grandparents, friends, employers, and others can also contribute additional funds over time, up to $5,000 per year combined (indexed for inflation after 2027). The government seed contribution does not count against this annual limit.

The Good

1. Contributions Do Not Require Earned Income

One of the more interesting features is that children do not need earned income to receive contributions.

That matters because Roth IRAs require earned income. A 6-year-old typically cannot contribute to a Roth IRA, but they could receive contributions to a Trump Account.

This allows parents to begin long-term investing much earlier.

2. Long Time Horizon

The biggest advantage young investors have is time.

Even relatively small contributions made early in childhood can compound for decades. For example, $2,000 invested at birth earning 8% annually would grow to more than $43,000 by age 40 without adding another dollar.

That’s the power of compounding.

3. Does Not Affect IRA Contribution Limits

Another useful feature: Trump Account contributions do not count against IRA contribution limits.

That means a teenager with earned income could potentially contribute to both a Roth IRA and a Trump Account simultaneously.

This creates additional flexibility for families that already save aggressively.

4. Employer Contributions Are Possible

This is one of the more overlooked features. Employers may voluntarily contribute up to $2,500 per year to the Trump Account of an employee or their dependent child — and that contribution is excluded from the employee’s taxable income.

To do so, employers must establish a formal Trump Account Contribution Program (TACP) — a separate written plan document. Participation is entirely voluntary; no employer is required to offer this benefit.

For business owners, this could be worth exploring as a recruiting or retention tool, though nondiscrimination rules (similar to dependent care FSA rules) add some administrative complexity.

The Trade-Offs

1. No Upfront Tax Deduction

Trump Account contributions are made with after-tax dollars. There is no tax deduction for contributing.

2. Withdrawal Tax Treatment Is Still Being Finalized

Once the child reaches adulthood, the account converts to a traditional IRA. Withdrawals are generally expected to be taxed as ordinary income — but the precise tax treatment of distributions is still subject to ongoing IRS guidance. Do not treat this as fully settled yet.

This is one of the biggest differences versus a Roth IRA, where qualified withdrawals can be completely tax-free.

3. Full IRA Rules Apply After Age 18 — Including the 10% Penalty

This is a critical detail that often gets glossed over.

Once the child turns 18 and the account converts to a traditional IRA, standard IRA withdrawal rules apply — including the 10% early withdrawal penalty for distributions taken before age 59½, unless an exception applies.

That means this is not a freely accessible savings bucket once your child heads off to college. A 22-year-old cannot simply tap the account without potential penalty. Families should plan accordingly.

4. Investment Options Are Limited

The accounts are intentionally restrictive. Investments are limited to low-cost U.S. equity index funds or ETFs that track a major index, with an expense ratio cap of 0.10% (10 basis points) and no leverage allowed.

For some investors, that simplicity may be a positive. Others may prefer more flexibility.

5. No Special Education Tax Benefits

Unlike a 529 plan, there are no dedicated tax benefits tied specifically to education expenses. These accounts should not automatically replace college savings strategies.

So…Should Parents Use Them?

For most families, I would not view Trump Accounts as the first priority.

My general order of operations would still look something like this:

1. 529 Plan

Especially for Minnesota families, where there is a state tax benefit. 529 plans remain one of the most efficient ways to save for education, with tax-free growth and tax-free withdrawals for qualified education expenses.

2. Taxable Investment Account

A regular brokerage account still offers the most flexibility.

• No contribution restrictions
• No age limitations
• No penalties tied to specific use cases

For many families, flexibility matters most.

3. Roth IRA (Once Kids Have Earned Income)

Once children begin working, Roth IRAs are still incredibly attractive because of their tax-free growth potential.

A teenager contributing even modest amounts to a Roth IRA can create enormous long-term value.

4. Trump Accounts

After the above are in good shape, there can be a role for Trump Accounts as an additional long-term savings bucket.

Not because they are magical. Not because they replace existing tools. But because additional tax-advantaged savings flexibility is generally a good thing — particularly for higher savers who have already maximized other options.

The Bigger Picture

The larger takeaway here is not really about politics.

It is about getting families to think about investing earlier.

If these accounts encourage more parents to start saving and investing when children are young, that is probably a good outcome.

But as with almost every financial product, the details matter — and several details here are still being finalized by the IRS. A good account used in the wrong order can still be a bad financial decision.

Comparing the Main Savings Options for Kids

My General Planning Hierarchy for Most Families

For most households, I would generally prioritize accounts in this order:

1. Emergency savings and parent retirement planning first
2. 529 plan contributions
3. Taxable investment account for flexibility
4. Roth IRA contributions once kids have earned income
5. Trump Accounts as an additional supplemental bucket

That order can absolutely change depending on income, financial aid goals, retirement status, or whether college funding is even a priority.

But in most cases, the biggest mistake is not choosing the “wrong” account.

It is failing to start early at all.

Mark Struthers, CFA, CFP®, CEPA, RMA®

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This commentary is provided for general information purposes only, should not be construed as investment, tax, or legal advice, and does not constitute an attorney/client relationship. Past performance of any market results is no assurance of future performance. The information contained herein has been obtained from sources deemed reliable, but is not guaranteed.